Obama’s Budget: Strengths and Shortcomings

President Obama’s new budget calls for substantial tax reform, higher taxes on the wealthy, cuts in some programs and additional spending in others. The plan drew heavy criticism from Republicans and mixed reviews from The Concord Coalition and other non-partisan analysts.

Robert L. Bixby, Concord’s executive director, described the plan as resembling a Rorschach test: “Interpreting Obama’s budget depends a lot on which proposals and projections you emphasize.” He said it is important to focus not on how much deficit reduction is claimed but on “where spending, revenues, deficits and debt end up as a percentage of the overall economy, and whether the policy assumptions for getting there are credible.”

On the positive side, Obama’s budget recognizes that the country’s fiscal challenges cannot be met by focusing only on further restraint in the discretionary spending that Congress approves each year for domestic programs and defense. Elected officials must also focus on entitlement spending, health care costs and the tax system.

The President continues to call for doing away with many of the special provisions in the tax code that favor some taxpayers over others, worsen the deficit and make tax returns unnecessarily complex. His efforts to achieve some incremental savings in various areas are noteworthy as well.

It is disappointing, however, that the administration has not shown greater commitment to the broad structural reforms that were recommended by his fiscal commission as well as other bipartisan groups.

Bixby also faults the administration for some of its numbers, including $850 billion in “war savings” that were not going to be spent anyway. “And while the President plans to save some money by letting certain tax cuts expire for the wealthy this December, those ‘savings’ would be more than wiped out by his proposal to extend the tax cuts for everyone else,” Bixby said.

It would be difficult to pursue some of the policy initiatives in the President’s plan while complying with recently enacted budget restraints. For example, the proposed budget calls for major new domestic investments while at the same time promising to stick with caps that are projected to cut discretionary spending to its lowest level in the past 50 years.